Today, Congressman Dave Camp (R-MI), Chairman of the House Ways and Means Committee, made public his proposal to reform the federal tax code, in which he calls for changes to the mortgage interest deduction. He would lower the cap on the size of mortgage for which interest can be deducted from $1 million to $500,000. Mr. Camp’s willingness to change the mortgage interest deduction indicates that it is no longer the untouchable third rail of tax policy and is ripening for reform.
The National Low Income Housing Coalition (NLIHC) has long called for modifications to the mortgage interest deduction, including lowering the cap to $500,000. Our research shows that just 4% of all mortgages taken out between 2009 and 2012 were for more than $500,000. We support H.R. 1213, the Common Sense Housing Investment Act of 2013, which would lower the cap to $500,000 and convert the deduction to a 15% non-refundable tax credit. The bill would use the revenue raised by these changes to address the acute shortage of rental housing affordable for the lowest income households, including people who are homeless.
Mr. Camp’s purpose in changing or eliminating various tax deductions and credits is to collapse and lower tax rates, and not to raise revenue for low income housing or anything else. He also would make changes to the Earned Income Tax Credit that would hurt low income households and to the Low Income Housing Tax Credit that would impede efforts to preserve affordable housing. These are among the reasons NLIHC would not support Mr. Camp’s bill.
However, NLIHC applauds Mr. Camp for taking on the mortgage interest deduction, an expensive and inefficient subsidy that has distorted the U.S. housing market for many years.
Learn more about H.R. 1213 and NLIHC’s campaign to reform the mortgage interest deduction at www.unitedforhomes.org.
Dr. Crowley is available for further comment.